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This article is from the January/February 2018 issue.

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Is Economic Growth Environmentally Sustainable?

By Arthur MacEwan | January/February 2018

Dear Dr. Dollar:

I keep hearing progressive economists talking about environmental sustainability, in particular in the context of the looming catastrophe of global climate change. But when it comes to macroeconomics, they seem to switch to talking “growth, growth, growth.” Aren’t the two contradictory?
    —Anonymous, Washington, D.C.

The first law of ecology is that everything is related to everything else.
    —Barry Commoner

As is the case with many questions, the answer is “yes and no.”

Economic growth of the kind we have had for the last two hundred years—or longer—is in conflict with environmental sustainability. More growth has meant the use of more carbon-based fuels, so this growth has spewed more and more carbon dioxide into the atmosphere—and thus global warming. (Global warming is not the only environmental issue, but it is the danger that threatens the existence of human society as we know it. So let’s focus on it here.)

Yet, the carbon intensity of economic growth is not something beyond social control. There are ways to grow—meeting human needs and desires—that greatly reduce, if not eliminate, the global warming impact. Most macroeconomic analyses, however, focus simply on growth without consideration of how this growth would affect the environment. There are two reasons for this error, one bad and one good.

The bad reason is that most economist take the basic arrangements of society for granted. They take the nature of technology as “given,” and do not question either the technology itself or the social and political forces that maintain the existing path of technology.

The good reason is that we have more than one problem, and growth can provide positive social outcomes—reducing unemployment, general economic insecurity, and absolute poverty. None of this does any good if we are all soon washed away by rising tides, but it is a good reason that economic growth cannot be jettisoned out of hand.

Some Context

The environmental impact of human activity can be understood in terms of three factors:

  • how many of us there are on the planet (population),
  • the amount of output of goods and services produced per person (affluence), and
  • the amount of environmental impact per unit of output (technology).

Over time, in terms of environmental impact, all three components of this relationship have gotten worse: population has grown and grown, the world as a whole has become more affluent, and technology has become more carbon intensive (more negative impact per unit of output). To halt global warming, it is necessary to pay attention to each of these factors.

What Can Change?

Population growth, at least in the long-run, can be reduced. Making contraception safe and widely available can help. Also, increased educational and employment opportunities for women tend to reduce fertility. But many people, especially in the agricultural sectors of low-income economies, choose to have several children. Children are their security, providing more hands to do a family’s work and providing support for aging parents. Without greater affluence—hard to attain without economic growth—population will continue to grow. (That the most rapid population growth in the world is centered in African countries, which are among the least prosperous, illustrates the point.)

Curtailing economic growth as a means to contain environmental destruction has at least two main problems. First, unless it involves a massive, global redistribution of income and wealth, it condemns those at the bottom (countries and people) to their current economic level—both morally reprehensible and probably politically impossible. It is also probably politically impossible to overcome the obstacles to a massive redistribution. There are about 7.5 billion people in the world and total production is about $125 trillion, which means that average income is about $16,667. With no growth and redistribution getting everyone to this level, it would be necessary to reduce average income in the United States by over 70%, and in the Euro area and Japan by over 60%.

The second barrier to curtailing growth is that capitalism, which is pretty much the operating system of the whole world these days, is like a bicycle: If it stops, it (and the rider) falls over. The system depends on profits, and profits depend on either growth or redistributing income upward, and the latter has its limits. Getting rid of capitalism, running the world economy a different way, could have salutary results—though other social systems can do, and have done, substantial damage to the environment. Certainly, the political problems of getting rid of capitalism and insuring that its replacement would be environmentally friendly is a politically daunting tasks.

The Technology Option

Dealing with global warming needs to involve inhibiting population growth and curtailing economic growth—which means at least sharply constraining capitalism. But that’s not enough. There need to be dramatic changes in the technology. At the present time, the most promising energy production technologies are wind power and photovoltaics. Also, energy conservation has great potential for reducing the emissions of greenhouse gases.

The effectiveness of the technology option has been demonstrated in other countries. As Frank Ackerman pointed out in the May/June 2017 issue of Dollars & Sense, renewable electricity generation expanded from 5% of total German power consumption in 1999 to over 30% in 2015. Over the same period, Ackerman concludes, “there has been no increase in [carbon] emissions from the electric sector ... [and] the reliability of the German electric system has continued to improve.”

The problem, then, is not so much technical (i.e., developing ways to reduce emissions). The problem is political. Halting subsidies to the fossil fuel industries and providing support for environmentally friendly technological change would be good beginnings. Also, a great deal could be accomplished through encouragement of energy conservation programs. Further steps will require major limitations on firms’ operations, limitations that prevent them from ignoring the health, safety, and, ultimately, the survival of the populations. A difficult task, of course, but we really have no choice.

is professor emeritus of economics at UMass-Boston and one of the founders of Dollars & Sense.

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